Irish households have been warned to brace themselves for the sharpest cost of living squeeze since the early 1980s after another significant jump in the official inflation rate.
The latest figures from the Central Statistics Office (CSO) show the annual rate of price growth in the Irish economy rose to 7 per cent in April thanks – in the main – to higher energy, fuel and grocery prices.
The last time inflation was higher was November 2000, but experts are warning that the peak of the current price surge has yet to come and that inflation may hit close to 9 per cent in the coming months.
The CSO’s latest Consumer Price Index (CPI) detected a broad-based price rise across the Irish economy in April.
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The main drivers were energy and fuel. Electricity, gas and other fuels were up over 45 per cent year-on-year. Within this category, electricity prices were up 28 per cent, while gas prices rose by over 50 per cent. Home heating oil has soared by 90 per cent in just 12 months.
The cost of motoring has also risen sharply, with petrol and diesel prices up 24 per cent and 40 per cent respectively. Airfares are up on average by 93 per cent since April last year.
The cost of food and non-alcoholic beverages has also increased by an average of 3.5 per cent year-on-year due to higher prices across a range of products such as meat, bread and cereals, mineral waters, soft drinks, fruit and vegetable juices, and milk, cheese and eggs.
The cost of miscellaneous goods and services, one of the only categories to record a decline, decreased mainly due to a reduction in motor insurance premiums.
Price pressures
In its latest quarterly bulletin the Economic and Social Research Institute (ESRI) predicted the headline rate of inflation will rise to 8.5 per cent or higher in the coming months, a level not seen since the early 1980s, as the war in Ukraine compounds existing price pressures.
The outlook for inflation “is very much dependent on what happens in the Ukraine and the knock-on implications for energy markets”, the ESRI’s Kieran McQuinn said.
SSE Airtricity on Thursday pledged to hold steady its energy tariffs for existing domestic customers struggling most with their bills.
“With higher international energy prices continuing to impact cost-of-living, this announcement provides certainty for its financially vulnerable customers for the remainder of this year,” the company said.
Experts are, meanwhile, also warning about possible second-round effects in the form of higher wage demands.
“With this level of ongoing inflation, pay demands from employees seem inevitable this year,” said Barry Whelan, chief executive of Excel Recruitment.
“That said, each business sector is different – sectors that are experiencing a shortage of skilled workers, such as transport, have already seen significant pay increases – for example, our most recent salary guide showed that in 2020, the average going rate for an artic truck driver would be €30,000 but in 2021 the range jumped to €40,000-€50,000 for artic drivers.”
Consumers
Separately, a Deloitte State of the Consumer survey found the average planned monthly spend among consumers in the State decreased by 10 per cent over the last month, according to Deloitte’s latest State of the Consumer Tracker.
The survey, carried out at the end of April in 23 countries, also found that consumers in the Republic are 10 per cent more worried about inflation than the global average, with more than half concerned about their savings level.
Some 1,000 Irish consumers were surveyed.
“Consumers in Ireland are notably less optimistic about their finances than the global average, with significant increases in the cost of essentials inevitably leading to a contraction in planned discretionary spend,” said Daniel Murray, partner and head of consumer at Deloitte Ireland.
